Ford eyes self-driving with Argo AI stake

Ford has announced a $1 billion investment in Argo AI, a newbie that was just another anonymous tech startup—until 10 days ago. Argo AI was founded only last November by two AI robotics experts, Bryan Salesky originally from Google and Peter Rander from Uber. The company cleverly avoided notice entirely until Ford came calling.

That got us thinking.

How many tech startups are out there – waiting to be snatched up, or hoping to become the next Waymo (formerly the Google self-driving car project)?

And more importantly, who are they?

Clearly, the recent Ford-Argo AI announcement illustrates how both car OEMs and tech startups have been courting one another, but getting any eventual union done right is no cakewalk.

This deal shows a lot of the finesse, care and advance thinking Ford needed to lure Argo AI’s founders, and to create a business model that works for both parties.

Ford came up with what its President and CEO Mark Fields calls a “hybrid model.” Ford becomes the majority stakeholder in Argo AI, but Argo AI will operate with substantial independence. The startup will have significant equity in the company, making it easier to hire top talent.

When General Motors bought self-driving tech startup Cruise Automation a year ago for more than $1 billion, GM initially looked like it overpaid. In reality, the automaker structured the deal to pay out $1 billion over a long period. Obviously, GM needs to keep the engineering team intact, and they didn’t want Cruise guys to cash out.

Figure 2: Chevrolet Bolt EV With Cruise Automation Tech. Source: GM.

Moreover, Egil Juliussen, director research, Infotainment & ADAS at IHS Automotive, said GM has kept Cruise as a separate group, with the Cruise team focused on integrating their technology only on electric vehicles, not in other GM models. “That’s absolutely the right way to do it,” said Juliussen. “I am impressed how well GM has adopted the Cruise team.”

Ford-Argo AI’s model is a little different, since some of the Ford autonomous-vehicle teams are scheduled to be integrated in its subsidiary Argo AI.

Either way, the moral of the story isn’t just finding the right partner. It takes more than a simple acquisition to make a marriage work.